At Davos, China and India Make Deals While Europe Reels

The Alpine talkfest begins with a surging China, a rising India, emboldened bankers, and very worried Europeans

DAVOS, Switzerland
-- A year ago, when the annual conclave of the world's political,
financial and business elite known as the World Economic Forum met in
this Alpine ski resort, the mood was as gloomy and overcast as the
weather.

Bankers were literally ducking for cover, fears of a double-dip
recession were rampant, and distrust of China was palpable. Europeans
brushed off the mounting Greek tragedy as a one-off debt crisis that
couldn't possibly affect anyone else across the eurozone.

On Tuesday, the five-day forum begins with 2,500 participants --
including 1,400 top business leaders and 35 heads of state -- tackling
(or at least talking about!) the world's problems. The weather and the
overall climate of the meetings should be a bit sunnier for all
involved. Except for Europe.

That, at least, is the forecast of seasoned Davos-watchers, who have begun trudging up the mountain again for a gathering that has taken as its theme this year the notion of "shared norms for a new reality." Or, as Klaus Schwab, the redoubtable founder and executive chairman, said of the 41st meeting: "The shifts of political and economic power from west to east and from north to south, as well as the speed of technological innovation, have created a completely new reality."

CHINA AND INDIA RISING

The world's biggest shift of power was on display just a few days
ago during the state visit to Washington by China's President Hu
Jintao. So it is no coincidence that China is fielding the biggest
delegation in Davos history this year. India is not far behind, and
both of the world's new and rising economic superpowers will also
dominate the cultural mood with soirees and entertainment as well as
hard talk on and off stage.

Watch out for Susilo Bambang Yudhoyono, the shy but smart president
of Indonesia, and Russia's Dimitri Medvedev

The hundreds of Western business leaders, an army of middle-aged
white guys who make up the majority of attendees here, now appear less
interested in hand-wringing over China's rise, and more intent on
scoring as many contracts as possible with Beijing. And China, armed
with its $2.85 trillion of reserves and a 10% growth economy, seems
keen to continue using its financial clout to buy friends and influence.

India, by contrast, has a more subtle approach to the Davos crowd,
and the country is at pains to stress its message of "Inclusive India"
-- a variation on the "Incredible India!" motto that won so many hearts
when India made its first big splash here five years ago. Billionaire
tycoons Mukesh Ambani and Anand Mahindra and veteran cabinet minister
Kamal Nath are plugging their nation of 1.1 billion for both the go-go
growth of their neighbor and rival China and a more rules-based system
based on democracy.

In short, China and India see Davos as place to pitch the Fortune
500 crowd, while Americans and Europeans see Davos as a talky ideas
conference.

EUROPE'S TALK THERAPY

The Europeans meanwhile, will be out in force, with big speeches
from Germany's Angela Merkel, Nicholas Sarkozy of France and David
Cameron, the new kid on the block from Britain.

Merkel -- the self-appointed guardian of the euro, paymaster of Europe, and disciplinarian of Europe's wayward PIIGS
-- can be expected to be her usual stern, dry and impressive self.
Europeans are very, very worried about the euro-zone crisis, and none
of them can afford to be complacent. Their biggest macro-economic
challenge is that Germany is roaring ahead at a growth rate of more
than 3% (thanks of course to the fact that everyone, especially high
growth Asia and Mideast customers, want their machine tools, and their
Audis, Porsches, Mercedes and Volkswagens), but the rest of Europe is
still in a fragile semi-recovery or non-recovery.

And that places the most talented central banker on the planet
today, Jean-Claude Trichet of the European Central Bank, between a euro
and a hard place. If he hikes interest rates to dampen inflation in
Germany, he could kill other European economies' recovery. What to do?
This is possibly the single most concrete issue that will be talked
about at Davos this week.

While Mr. Cameron will make his Davos debut as prime minister with
his usual intelligence, grace and clarity, the crowd up here is waiting
with a mixture of foreboding and glee for the appearance of Sarkozy.
Last year Sarkozy ranted and raved and yelled about the impending
disappearance of the U.S. dollar as the world's key currency. This year
he will be ranting and raving about commodity prices, about the need to
tax global financial transactions and about all sorts of half-baked
ideas that he will no doubt foist upon an unwilling world in his
temporary glory now that France has the presidency of the G-20 in 2011.
God help us all!

FRESH FACES AND BAD BOY BANKERS

The two most original appearances could be the shy but smart
president of Indonesia, Susilo Bambang Yudhoyono (perhaps the most
interesting and exciting new member of the G-20), and Russia's Dimitri
Medvedev, nominally the president of his country.*

Yudhoyono, or "SBY" as he is known back in Jakarta, has been
presiding over a formerly corrupt dictatorship that he is successfully
steering along the path of its newfound democracy. With a strong
anti-corruption program and a country rich in natural resources (gold,
oil, gas, timber and bauxite, to name a few), Indonesia's 240
million-person economy is growing at nearly 6 percent a year. Indonesia
is, as former Prime Minister John Major said recently, "an undiscovered
gem" and it will be interesting to see how SBY comes across to the
Davos crowd later this week.

As for Medvedev, he will likely have two main goals: to show that he
is his own man, and to woo international investors. Watch this space
for more as the week progresses.

Finally, the one-time bad boys of Wall Street, those bonus-grabbing,
self-trading fellows who keep telling us that they are really and truly
nothing like Gordon Gekko, yes the folks who are widely seen to have
helped cause the world economic crisis of recent years, are back, and
Davos has got them in spades. All of the All Stars will be here, from
JP Morgan's Jamie Dimon to Morgan Stanley's John Mack, plus Credit
Suisse's Brady Dougan, Deutsche Bank's Joe Ackerman, and the undisputed
leader of The Unrepentants, Barclays Bank's Bob Diamond.

It was Diamond who recently pushed back against the critics,
thrashing them for playing the "blame game," and telling a House of
Commons committee that the period of "remorse and apology for banks ...
needs to be over." (It may be no coincidence that even a year ago, when
the bankers still wore sackcloth and ashes, the biggest champagne gala
was thrown by Barclays.)

If all of this seems a trifle cynical, let me say that at its best,
Davos really can provide serious intellectual stimulation and a sense
of the global agenda. This year I am much more interested in watching
how Robert De Niro (a Davos virgin) reacts to the crowd than in yet
another nightcap with George Soros. And I feel snug in this Alpine
perch, knowing that the perimeter is well secured by 5,000 machine-gun
toting and ever-vigilant Swiss soldiers in a huge Davos lockdown that
should discourage protesters, loonies, and even the most determined
anti-globalization snowball thrower.

*Editor's Note, August 22, 2011: Recent media reports suggest that FBC Media, the public relations and communications firm chaired by Alan Friedman, may have been representing the government of Indonesia at the time Friedman wrote this post. According to our arrangement with Friedman, he should not have written about any clients of his company. We are reviewing these and other posts written by Friedman. We will update this note with information regarding any business relationship we discover between FBC and the government of Indonesia.

Alan Friedman, a longtime Davos attendee, is chairman of FBC Media, a public relations and communications firm whose roster of clients includes foreign governments. He has worked as an economics columnist for the Financial Times and the Wall Street Journal. [This bio was amended to reflect the nature of FBC's work.]